Zee share price gained over 7% in early trade on Wednesday after a sharp 33% slump in the previous session. Zee shares rose as much as 7.82% to ₹168.10 apiece on the BSE.
On January 23, Zee Entertainment Enterprises share price cracked 33% to close at ₹155.90 on the BSE after the termination of the merger deal with Sony spooked investors, prompting apprehensions about Zee’s future growth prospects and the overall valuation of its stock.
Sony ended its merger agreement and demanded $90 million in termination fee. Zee stock erased more than ₹7,000 crore market-cap in a single day.
Read here: Zee share price tanks 33%, erases over ₹7k crore mcap as Sony calls off merger; brokerages downgrade stock
Around 24 crore equity shares of Zee Entertainment Enterprises were traded on January 23, with delivery volume of 10 crore shares. The one-week average trading volume of Zee shares is 8 crore.
The termination of the Zee-Sony merger is likely to result in sharp de-rating of valuation multiple for Zee, analysts said. It will also result in a financial strain on Zee on account of termination charge and create an uncertainty surrounding the pay-out relating to ICC rights putting its sports aspirations on backburner.
“Zee is operationally facing many challenges in the form of subdued Advertising business, depleting viewership share in its key markets like Hindi GEC, Tamil and Marathi markets. competitive pricing in Subscription business and slow growing OTT business with competition from the biggies. Therefore the stock saw a free fall yesterday and may see some buying post we see a further fall in it,” said Ashwin Patil, Senior research analyst at LKP Securities.
According to a report, Zee founder Subhash Chandra wrote to Finance Minister Nirmala Sitharaman seeking her intervention to ‘safeguard the interest of Zee Entertainment’s minority shareholders.’
According to a CNBC-TV18 report, Chandra believes that market regulator Securities & Exchange Board of India (SEBI) has been acting with a predetermined mind and a new notice sent to its former directors at this stage, appears to be an exercise to sensationalise the matter.
Meanwhile, most brokerages downgraded Zee shares and slashed their target prices after the deal was called-off.
CLSA downgraded the stock rating to a ‘sell’ from a previous ‘buy’ and cut the target price by 34% to ₹198. The foreign brokerage highlighted the considerable competitive challenges anticipated for Zee, serving as an additional deterrent for the stock.
Also Read: Zee Entertainment share price tanks more than 30%: Mutual funds loose more than ₹1,900 crore in a day
It also sees heightened competition in the media sector, particularly with the reported merger of Reliance and Disney Star.
“With the Zee-Sony merger being terminated, we believe Zee’s PE (price-to-earnings ratio) will slump back to 12 times levels, seen before the Sony merger announcement in August 2021,” CLSA said.
Zee Ent shares have cracked more than 32% in one week, while the stock is down over 38% in one month. Over the past one year, Zee shares have fallen more than 25%.
At 9:50 am, Zee shares were trading 4.81% higher at ₹163.40 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 24 Jan 2024, 09:30 AM IST